Photo: Subaru of Indiana
Foreign investment is growing in Indiana, according to a recent report by the Indiana Business Research Center.
The report measured foreign direct investment, or FDI, which refers to foreign companies operating ventures in the United States. FDI growth is defined as foreign companies establishing new operations in a foreign country as well as acquiring assets and merging operations.
“What is going on is that firms that are based elsewhere, whether its Germany or Japan, hold the American assets in a legal and financial way,” report author Tim Slaper explains.
Slaper’s research shows that nearly 145,000 Indiana residents were employed by a company with a majority foreign stake in 2011, the year with the most recent data available. That’s up about eight percent from the previous year.
Slaper says the majority of these jobs are in manufacturing, which is in line with national trends. However, it’s even bigger business in Indiana, where 63.7 percent of FDI employment was in manufacturing, compared with the nationwide average of 36.9 percent.
That’s due to the state’s healthy auto manufacturing industry, which includes Japanese-owned plants in Lafayette, Princeton and Greensburg.
“Japan is by far and away the larger player in terms of foreign direct investment,” says Slaper.” I think that’s probably the result of decades-long relationships that have been forged with Japan, and it does also point to the fact that Japan is known for automobile manufacturing but other manufacturing as well.”
So what makes Indiana so attractive to foreign companies? The Hoosier state has a lot of things going for it, says Michael Hicks, a professor of economics at Ball State University who also serves as the Director of the Center for Business and Economics Research.
“It is centrally located, we really are the crossroads of the nation,” he says. According to Hicks, Indiana also is attractive in terms of regulatory complexity, costs of land and costs of living. Finally, the state boasts a powerhouse workforce.
“In terms of productivity of workers and manufacturing, Indiana’s pretty strong.”
Hicks says FDI is a good overall indicator of a state’s economic health, noting “There’s always a smiley face associated with it.”
Foreign companies pump a lot of money into local economies through wages earned by workers, raw materials bought and sold for use in factories and tax dollars paid by the foreign company that are funneled directly into Indiana communities.
“Whether or not it’s a German company or a Kentucky company doesn’t really have much effect on the overall economy of Indiana,” says Hicks, “except that if they’re coming from another country, they’ve looked globally and chosen Indiana as a place to come.”
Hicks notes the FDI statistics might not be as favorable in the coming years, as data will begin to reflect the market instability in the EU that reached its peak in 2012 and 2013.